1. Chapter 2
Quality Management
Beni Asllani
Operations MMaannaaggeemmeenntt -- 66tthh EEddiittiioonn
Roberta Russell & Bernard W. Taylor, III
University of Tennessee at Chattanooga

2. Lecture outline
 What is quality?
 Evolution of quality
management
 Quality tools
 TQM and QMS
 Focus of quality
management—
customers
 Role of employees in
quality improvement
 Quality in service
companies
 Six sigma
 Cost of quality
 Effect of quality
management on
productivity
 Quality awards
 Iso 9000
2-2

3. What Is Quality?
 Oxford American Dictionary
 a degree or level of excellence
 American Society for Quality
 totality of features and characteristics that
satisfy needs without deficiencies
 Consumer’s and producer’s perspective
2-3

4. What Is Quality:
Customer’s Perspective
 Fitness for use
 how well product or
service does what it is
supposed to
 Quality of design
 designing quality
characteristics into a
product or service
 A Mercedes and a Ford
are equally “fit for use,”
but with different design
dimensions.
2-4

5. Dimensions of Quality:
Manufactured Products
 Performance
 basic operating characteristics of a product; how
well a car handles or its gas mileage
 Features
 “extra” items added to basic features, such as a
stereo CD or a leather interior in a car
 Reliability
 probability that a product will operate properly within
an expected time frame; that is, a TV will work
without repair for about seven years
2-5

6. Dimensions of Quality:
Manufactured Products (cont.)
 Conformance
 degree to which a product meets pre–
established standards
 Durability
 how long product lasts before replacement;
with care
 Serviceability
 ease of getting repairs, speed of repairs,
courtesy and competence of repair person
2-6

7. Dimensions of Quality:
Manufactured Products (cont.)
 Aesthetics
 how a product looks, feels, sounds, smells, or
tastes
 Safety
 assurance that customer will not suffer injury or
harm from a product; an especially important
consideration for automobiles
 Perceptions
 subjective perceptions based on brand name,
advertising, and like
2-7

8. Dimensions of Quality: Services
 Time and timeliness
 how long must a customer wait for service,
and is it completed on time?
 is an overnight package delivered overnight?
 Completeness:
 is everything customer asked for provided?
 is a mail order from a catalogue company
complete when delivered?
2-8

9. Dimensions of Quality:
Services (cont.)
 Courtesy:
 how are customers treated by employees?
 are catalogue phone operators nice and are
their voices pleasant?
 Consistency
 is same level of service provided to each
customer each time?
 is your newspaper delivered on time every
morning?
2-9

10. Dimensions of Quality:
Services (cont.)
 Accessibility and convenience
 how easy is it to obtain service?
 does service representative answer you calls quickly?
 Accuracy
 is service performed right every time?
 is your bank or credit card statement correct every month?
 Responsiveness
 how well does company react to unusual situations?
 how well is a telephone operator able to respond to a
customer’s questions?
2-10

11. What Is Quality:
Producer’s Perspective
 Quality of conformance
 making sure product or service is produced
according to design
if new tires do not conform to specifications, they
wobble
if a hotel room is not clean when a guest checks
in, hotel is not functioning according to
specifications of its design
2-11

12. Meaning of Quality
2-12

13. What Is Quality:
A Final Perspective
 Customer’s and producer’s perspectives
depend on each other
 Producer’s perspective:
 production process and COST
 Customer’s perspective:
 fitness for use and PRICE
 Customer’s view must dominate
2-13

14. Evolution of Quality
Management: Quality Gurus
 Walter Shewart
 In 1920s, developed control charts
 Introduced term “quality assurance”
 was an American physicist, engineer and statistician,
sometimes known as the father of statistical quality control
2-14

15.  W. Edwards Deming
 Developed courses during World War II to teach statistical
quality-control techniques to engineers and executives of
companies that were military suppliers
 After war, began teaching statistical quality control to
Japanese companies
 was an American statistician, professor, author, lecturer, and
consultant. He is perhaps best known for the
"Plan-Do-Check-Act" cycle popularly named after him. In
Japan, from 1950 onward, he taught top business managers
how to improve design (and thus service), product quality,
testing, and sales (the last through global markets)[1] by
various means, including the application of statistical methods
2-15

16.  Joseph M. Juran
 Followed Deming to Japan in 1954
 Focused on strategic quality planning
 Quality improvement achieved by focusing on projects to
solve problems and securing breakthrough solutions
 was a Romanian-born American management consultant and
engineer. He is principally remembered as an evangelist for
quality and quality management, having written several
influential books on those subjects
2-16

17. Evolution of Quality
Management: Quality Gurus
 Armand V. Feigenbaum
 In 1951, introduced concepts of total quality control and
continuous quality improvement
 an American quality control expert and businessman. He
devised the concept of Total Quality Control, later known as
Total Quality Management.
 Philip Crosby
 In 1979, emphasized that costs of poor quality far outweigh
cost of preventing poor quality
 In 1984, defined absolutes of quality management—
conformance to requirements, prevention, and “zero defects”
 was a businessman and author who contributed to
management theory and quality management practices.
2-17

18.  Kaoru Ishikawa
 Promoted use of quality circles
 Developed “fishbone” diagram
 Emphasized importance of internal customer
 was a Japanese organizational theorist, Professor at the
Faculty of Engineering at The University of Tokyo, noted for
his quality management innovations.
2-18

19. Deming’s 14 Points
2-19
1. Create constancy of purpose
2. Adopt philosophy of prevention
3. Stop mass inspection
4. Select a few suppliers based on
quality
5. Constantly improve system and
workers

20. Deming’s 14 Points (cont.)
6. Institute worker training
7. Instill leadership among supervisors
8. Eliminate fear among employees
9. Eliminate barriers between departments
10. Eliminate slogans and exhortations
2-20

21. Deming’s 14 Points (cont.)
11. Remove numerical quotas
12. Enhance worker pride
13. Institute vigorous training and
education programs
14. Develop a commitment from top
management to implement above
13 points
2-21

22. Deming Wheel: PDCA Cycle
2-22

23. Quality tools
 Process Flow Chart
 Cause-and-Effect
Diagram
 Check Sheet
 Pareto Analysis
 Histogram
 Scatter Diagram
 Statistical Process
Control Chart
2-23

24. Flow chart
2-24

25. Cause-and-effect diagram
 Cause-and-effect diagram (“fishbone”
diagram)
 chart showing different categories of
problem causes
2-25

26. Cause-and-effect matrix
 Cause-and-effect matrix
 grid used to prioritize causes of quality
problems
2-26

27. Check sheets and histograms
2-27

28. Pareto analysis
 Pareto analysis
 most quality problems result from a few
causes
2-28

29. Pareto chart
2-29

30. Scatter diagram
2-30

31. Control Chart
2-31

32. TQM and QMS
 Total Quality Management (TQM)
 customer-oriented, leadership, strategic
planning, employee responsibility,
continuous improvement, cooperation,
statistical methods, and training and
education
 Quality Management System (QMS)
 system to achieve customer satisfaction that
complements other company systems
2-32

33. Focus of Quality Management—
Customers
 TQM and QMSs
 serve to achieve customer satisfaction
 Partnering
 a relationship between a company and its
supplier based on mutual quality standards
 Measuring customer satisfaction
 important component of any QMS
 customer surveys, telephone interviews
2-33

34. Role of Employees in Quality
Improvement
 Participative problem solving
 employees involved in quality-management
 every employee has undergone
extensive training to provide
quality service to Disney’s
guests
 Kaizen
 involves everyone in process of
continuous improvement
2-34

35. Quality Circles
and QITs
 Quality circle
 group of workers and
supervisors from same
area who address
quality problems
 Process/Quality
improvement teams
(QITs)
 focus attention on business
processes rather than
separate company
functions
Training
Group
processes
Data collection
Problem
analysis
2-35
Presentation
Implementation
Monitoring
Solution
Problem results
Problem
Analysis
Cause and
effect
Data collection
and analysis
Problem
Identificatio
n
List
alternatives
Consensus
Brainstorming
Organization
8-10 members
Same area
Supervisor/moderat
or

36. Quality in Services
 Service defects are not always easy to
measure because service output is not
usually a tangible item
 Services tend to be labor intensive
 Services and manufacturing companies
have similar inputs but different
processes and outputs
2-36

37. Quality Attributes in Services
 Principles of TQM apply
equally well to services
and manufacturing
 Timeliness
 how quickly a service is
provided?
 Benchmark
 “best” level of quality
achievement in one
company that other
companies seek to achieve
“quickest, friendliest, most
accurate service
available.”
2-37

38. Six Sigma
 A process for developing and delivering
virtually perfect products and services
 Measure of how much a process deviates from
perfection
 3.4 defects per million opportunities
 Six Sigma Process
 four basic steps of Six Sigma—align, mobilize,
accelerate, and govern
 Champion
 an executive responsible for project success
2-38

39. Six Sigma:
Breakthrough Strategy—DMAIC
DDEEFFIINNEE MMEEAASSUURREE AANNAALLYYZZEE IIMMPPRROOVVEE CCOONNTTRROOLL
2-39
33..44 DDPPMMOO
67,000 DPMO
cost = 25% of
sales

40. Six Sigma:
Black Belts and Green Belts
 Black Belt
 project leader
 Master Black Belt
 a teacher and
mentor for Black
Belts
 Green Belts
 project team
members
2-40

41. Six Sigma
 Design for Six Sigma (DFSS)
 a systematic approach to designing products and
processes that will achieve Six Sigma
 Profitability
 typical criterion for selection Six Sigma project
 one of the factors distinguishing Six Sigma from
TQM
 “Quality is not only free, it is an
 honest-to-everything profit maker.”
2-41

42. Cost of Quality
 Cost of Achieving Good Quality
 Prevention costs
 costs incurred during product design
 Appraisal costs
 costs of measuring, testing, and analyzing
 Cost of Poor Quality
 Internal failure costs
 include scrap, rework, process failure, downtime, and price
reductions
 External failure costs
 include complaints, returns, warranty claims, liability, and
lost sales
2-42

43. Prevention Costs
 Quality planning costs
 costs of developing and
implementing quality
management program
 Product-design costs
 costs of designing
products with quality
characteristics
 Process costs
 costs expended to make
sure productive process
conforms to quality
specifications
 Training costs
 costs of developing and
putting on quality training
programs for employees
and management
 Information costs
 costs of acquiring
and maintaining data
related to quality, and
development and
analysis of reports on
quality performance
2-43

44. Appraisal Costs
 Inspection and testing
 costs of testing and inspecting materials, parts, and
product at various stages and at end of process
 Test equipment costs
 costs of maintaining equipment used in testing
quality characteristics of products
 Operator costs
 costs of time spent by operators to gather data for
testing product quality, to make equipment
adjustments to maintain quality, and to stop work to
assess quality
2-44

45. Internal Failure Costs
 Scrap costs
 costs of poor-quality
products that must be
discarded, including labor,
material, and indirect
costs
 Rework costs
 costs of fixing defective
products to conform to
quality specifications
 Process failure costs
 costs of determining why
production process is
producing poor-quality
products
 Process downtime costs
 costs of shutting down
productive process to fix
problem
 Price-downgrading costs
 costs of discounting poor-quality
products—that is,
selling products as
“seconds”
2-45

46. External Failure Costs
 Customer complaint
costs
 costs of investigating and
satisfactorily responding
to a customer complaint
resulting from a poor-quality
product
 Product return costs
 costs of handling and
replacing poor-quality
products returned by
customer
 Warranty claims costs
 costs of complying with
product warranties
 Product liability costs
 litigation costs resulting
from product liability and
customer injury
 Lost sales costs
 costs incurred because
customers are dissatisfied
with poor-quality products
and do not make
additional purchases

47. Measuring and Reporting Quality
Costs
 Index numbers
 ratios that measure quality costs against a base
value
 labor index
 ratio of quality cost to labor hours
 cost index
 ratio of quality cost to manufacturing cost
 sales index
 ratio of quality cost to sales
 production index
 ratio of quality cost to units of final product
2-47

48. Quality–Cost Relationship
 Cost of quality
 difference between price of nonconformance
and conformance
 cost of doing things wrong
20 to 35% of revenues
 cost of doing things right
3 to 4% of revenues
2-48

49. Effect of Quality Management on
Productivity
 Productivity
 ratio of output to input
 Quality impact on productivity
 fewer defects increase output, and
quality improvement reduces inputs
 Yield- a measure of productivity
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2-49
or
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50. Computing Product
Cost per Unit
2-50
= ( K )( I ) + ( K )( R ) Product Cost
d r Y
where:
K= direct manufacturing cost per unit
d I = input
K= rework cost per unit
r R = reworked units
Y = yield

51. Computing Product Yield
for Multistage Processes
2-51
Y = (I)(%g1)(%g2) … (%gn)
where:
I = input of items to the production process that will
result in finished products
gi = good-quality, work-in-process products at stage i

52. Quality–Productivity Ratio
QPR
 productivity index that includes productivity and
quality costs
2-52
QPR =
(good-quality units)
(input) (processing cost) + (reworked units) (rework cost)
((110000))

53. Malcolm Baldrige Award
 Created in 1987 to stimulate growth of
quality management in United States
 Categories
 Leadership
 Information and analysis
 Strategic planning
 Human resource focus
 Process management
 Business results
 Customer and market focus
2-53

54. Other Awards for Quality
 National individual
awards
 Armand V. Feigenbaum
Medal
 Deming Medal
 E. Jack Lancaster Medal
 Edwards Medal
 Shewart Medal
 Ishikawa Medal
 International awards
 European Quality Award
 Canadian Quality Award
 Australian Business
Excellence Award
 Deming Prize from Japan
2-54

55. ISO 9000
 A set of procedures and
policies for international
quality certification of
suppliers
 Standards
 ISO 9000:2000
 Quality Management
Systems—Fundamentals
and Vocabulary
 defines fundamental
terms and definitions
used in ISO 9000 family
 ISO 9001:2000
 Quality Management Systems
—Requirements
 standard to assess ability to
achieve customer satisfaction
 ISO 9004:2000
 Quality Management Systems
—Guidelines for Performance
Improvements
 guidance to a company for
continual improvement of its
quality-management system
2-55

56. ISO 9000 Certification,
Implications, and Registrars
 ISO 9001:2000—only
standard that carries third-party
certification
 Many overseas companies
will not do business with a
supplier unless it has ISO
9000 certification
 ISO 9000 accreditation
 ISO registrars
2-56

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2-57